Starbucks profits whipped as China changes same-store deals drops

May 4, 2023: On Tuesday, Starbucks reported quarterly earnings that beat analysts’ expectations, fueled by better-than-anticipated international sales.

In China, the firm’s second-largest market, Starbucks saw its same-store sales growth for the initial time since Starbucks’ financial third quarter, as customers returned to their places following the rollback of Beijng’s zero-Covid policy.

However, shares decreased 5.6% in extended trading after executives reaffirmed its complete fiscal-year outlook.

The coffee firm reported financial second-quarter net income of $908.3 million, or 79 cents per share, increased from $674.5 million, or 58 cents for each share, a year earlier.

Excluding items, Starbucks’ revenues are 74 cents per share.

Net sales increased 14.2% to $8.72 billion. The firm’s same-store sales climbed 11% in the quarter, which overcomes StreetAccount estimates of 7.1%. Both the U.S. and international businesses outperformed anticipations.

“This is remarkable on any level, but specifically given the seasonality pressures we typically experience in [the second quarter],” finance chief Rachel Ruggeri stated on the group’s conference call.

Some restaurant companies, such as Outback Steakhouse owner Bloomin’ Brands, report shrinking traffic as customers pull back on dining out. U.S. same-store sales increased 12% on a 6% increase in traffic. Starbucks joins fellow outliers such as McDonald’s and Chipotle Mexican Grill, which expressed a traffic jump.

The company said its active U.S. loyalty program members gained 15% from the year ago to 30.8 million in the quarter ended April 2.

Outside the U.S., the coffee chain’s same-store sales surged 7%.

In China, the metric increased by 3%. Starbucks China Chair Belinda Wong said that the markets saw 30% same-store sales growth in March and that momentum has continued into the financial third quarter.

“We’re very encouraged by the signs that we witness, but there’s a lot that we’re navigating,” Ruggeri expressed.

Last quarter, then-CEO Howard Schultz said the company expected its business in China would rebound in the second half of financial 2023.

Starbucks reaffirmed its financial-year outlook, projecting revenue growth of 10% to 12% and adjusted earnings-per-share growth on the low end of 15% to 20%.